Clause
100
Exclusion
of transfers out in certain
cases
Question
proposed, That the clause stand part of the
Bill.
12.30
pm
Mr.
Waterson:
I am slightly puzzled by the clause, which is
tucked away all on its ownsome. We had significant, substantive debates
earlier in our proceedings about transfers in and out of personal
accounts, and I wonder what the clause is for. As I read it, it seems
to deal only with transfers out of schemes set up under clause 50, but
it harks back to the Pension Schemes Act 1993, so perhaps I am
wrong about that. It seems to give the Secretary of State a power to
make regulations under that Act to prevent transfers out of a clause 50
scheme. On what basis would that power apply, and in what
circumstances?
The
concerns that we have expressed in previous debates have been about
transfers into personal accounts and trying to retain a Berlin wall
between existing provision and personal accounts—in other words,
trying to ensure that personal accounts do not undermine good and more
generous existing provision. The clause seems to be about only
transfers the other way, and I am I sure that the Minister can explain
it—in a sentence, if he is so
minded.
Mr.
Greenway:
I will be brief, because we want to make some
progress. I agree with my hon. Friend and would like the Minister to
tell us what the prescribed circumstances are. I may have this wrong,
as if so I apologise to the Committee and the
Minister— [Interruption.] The other Minister, the
Under-Secretary. Not having been able to be in the Committee throughout
the whole process, I apologise if this has already been discussed and
debated.
My
reading of the clause is that it enables the Secretary of State,
through regulations, to effectively prohibit transfers out of clause
50-type personal account schemes.
If that is the case, we also need to consider what limited exceptions
there may be in which transfers out are permitted. The Under-Secretary
will recall that, during the public evidence sessions, I raised the
question whether, when and to what extent it might be prudent to allow
limited transfers out, for example in respect of migrant labour. I
mentioned the importance of ensuring that a personal accounts scheme is
not eventually cluttered up with literally millions of relatively
small, insubstantial contributions. The
Under-Secretary is nodding reassuringly to say that I am on the right
point. In that case, I shall take 30 seconds longer to say
that if what I have said is the case, we need him to clarify precisely
what the prescribed circumstances will be and what time frame he
envisages. If I remember correctly from the questions that we put to
both Ministers on when transfers out might be permitted, it will
probably be 2017—five years into the personal account
arrangement—before that will be allowed. That is nine years
away. For the purposes of the record and proper scrutiny, we ought to
have something on the record to clarify the position. We cannot just
leave it where it was at the end of the public evidence sessions when
the Minister for Pensions Reform was one of the
witnesses.
Mr.
Plaskitt:
I know that the hon. Member for Eastbourne hoped
that I might dispense with the clause in a sentence. Alas, no, because
it is important to clarify exactly what it does. It is right to see it
as, in essence, a paving power; that is its purpose. Let me explain how
it relates to the earlier clauses to which the hon. Gentleman referred.
It is right to say that there is a linkage, but the clause is there for
a good
reason.
We
discussed our commitment to banning most transfers into and out of
personal accounts when we debated clause 53. Clause 100 enables the
Secretary of State to prohibit personal account members from
transferring pension funds to other pension schemes. Our rationale for
banning pension fund transfers is to position personal accounts as an
effective, complementary addition to the existing private pensions
market. The Government’s policy on transfers, and their
commitment to review it in 2017—that is important—was
widely supported by all stakeholders, as I am sure hon. Members will
recall.
Let me explain
in some detail why the clause is structured as it is. I think that that
will answer the points that have been raised. Chapter IV of part
IV of the Pension Schemes Act 1993 gives members of pension
schemes the general right to transfer out of their scheme into another
one, but section 93(1B) of that chapter contains a limited
regulation-making power that enables schemes to ban transfers out in
some limited circumstances. However, the power is not broad enough to
allow a ban on transfer out of personal accounts, and therefore clause
100(2) widens its
scope.
Clause 100(3)
amends section 101F of the 1993 Act to enable the Secretary of State to
introduce regulations to prevent members from transferring their
pension credit benefit, which we discussed earlier, out of the personal
accounts scheme. We plan to exercise the regulatory power in
subsections (2) and (3) only in respect of the personal accounts
scheme.
There may be
some minor specific circumstances where we will want to allow a certain
amount of
flexibility. The hon. Member for Ryedale asked for a bit more
information about them. It is important to stress that this will be
looked at in 2017, at the time of the review, but we can already see
circumstances for which it might be appropriate to make exceptions. Of
three that have been identified, one is the stranded pots issue, which
we touched on before. That is where someone who is over 55 wants to
aggregate all their pension pots in different schemes into one fund in
order to purchase an annuity. We might want to allow some flexibility
in that area when introducing the transfer out
regulations. A second
identified example is unvested pension funds. If an individual leaves
an exempt scheme during the pre-vesting period, they may be allowed to
transfer their accrued funds into personal accounts. Those will be cash
transfers, not standard pension transfers of the type that would be
prohibited, and the amounts will not count toward the annual
contribution limit. The third example, which we discussed earlier, is
the discharge of pension shares. That, too, would be appropriate in
some
circumstances.
However,
as I said, the fundamental opportunity to review the matter in its
entirety will come with the 2017 review, which is a long way off from
now but not so long after the start of personal pensions. That would be
the appropriate time to look at it. We will specify in legislation the
prescribed circumstances in which personal account members will be
prevented from transferring out of the scheme. The legislation will not
prevent other transfers between existing pension schemes from taking
place. It is important to stress that. The wider position on transfers
will be kept under review until
later.
The clause is
integral to the design of personal accounts schemes. It will allow the
Secretary of State to make regulations which will do three essential
things: first, keep the scheme focused on serving the needs of the
target market; secondly, facilitate the smooth introduction of the new
scheme, reducing any risk of market turbulence; and, thirdly, promote
simplicity for employers, individuals and the personal accounts
administration.
That
is why the clause was included. I hope that I have answered hon.
Members’ questions and that they will agree to clause stand
part.
Question put
and agreed to.
Clause 100 ordered to stand
part of the Bill.
Clauses 101 and 102 ordered
to stand part of the
Bill.
Clause
103
Polish
resettlement act 1947: effect of residence in poland
Question proposed, That
the clause stand part of the Bill.
Mr.
Waterson:
Ever since I first saw the Bill, I have been
fascinated by this clause and been determined to say something about
it. I initially wondered whether the official printer had not made a
mistake and incorporated something from wholly different legislation
into the
Bill, so I am keen to find out what lies behind it. I am sure that there
is a story, and it is important that the Minister shares it. Why just
the Poles for a start? What is the magic significance of 1 May 2004?
Indeed, for that matter, what is the magic significance of 1947? I
assume that the provision was designed to stop payments being made to
former members of Polish forces who fought valiantly and alongside us
in many theatres of the second world war, but who decided to chose to
return to communist post-war Poland. I may have got it completely
wrong, but there is a chunk of history here that deserves its moment in
the sun—in Committee Room 10.
Mr.
Plaskitt:
Well, the hon. Gentleman asked for it, so here
comes the history.
Mr.
Waterson:
The Schleswig-Holstein
question.
Mr.
Plaskitt:
Almost. I am very grateful to the hon. Gentleman
for giving us the opportunity to visit the question, and I shall give
him the history that he asks for.
The Polish Resettlement Act
1947, which is why the clause refers only to Poland, permitted a scheme
to be made to award pensions to members of the Polish forces injured or
killed during service under British command in the second world war. It
provides an equivalent to the main war pension scheme for those forces.
The current Pensions (Polish Forces) Scheme 1964 was set up on the
basis that at some point after the end of the war, the Polish
Government would take responsibility for members of the Polish forces.
No Polish Government have, therefore pensions continue in payment for
those individuals.
A European
Court of Justice ruling in October 2006, on a reference from a Dutch
court, found that similar residence restrictions in a Dutch scheme for
paying benefits to second world war civilians were contrary to the
principle of EU citizens’ freedom of movement between member
states, as set out in article 18 of the European convention on human
rights. That was notwithstanding member-state competence to make rules
for the payment of war pensions. The ECJ held that although the
objective of the residence condition of restricting benefits to those
connected to Netherlands society was legitimate in principle, the
condition was not a proportionate means of achieving the legitimate
objective. I am sure that the hon. Gentleman is following
this.
Advice received
from Ministry of Defence lawyers and Cabinet Office legal advisers
confirmed that the residency provision in the 1947 Act cannot be
justified in relation to beneficiaries who were EU citizens and had
moved to Poland after Polish accession to the European Union on 1 May
2004, unless they received the same amount from Poland as they used to
receive in the United Kingdom. The Polish system of war pensions is
more restrictive than that provided under the 1964 Scheme, and it
therefore does not provide the same benefits. The number of
beneficiaries under the Polish scheme is, unfortunately, shrinking
fast. It was 730 in 2007, and most beneficiaries are elderly and well
settled in the UK. They may be in Eastbourne, in which case they will
live quite a long time. It is highly unlikely,
therefore, that significant numbers will chose to return to Poland in
the remaining years of the scheme. However, some might, which is why
the clause is important. The number of beneficiaries who have moved to
Poland since 1 May 2004, and who have had their pensions withdrawn, is
understood to be fewer than 10. That is the history. That is the
reason. I hope, therefore, that the hon. Member for Eastbourne will
understand why the clause is in the
Bill. 12.45
pm
Mr.
Greenway:
I am now even happier that Polish plumbers,
electricians and builders are contributing income tax and social
security payments ensuring that
we can continue to afford such pensions being paid to Polish
citizens in Eastbourne well over 100 years of
age.
Mr.
Plaskitt:
That is a perfectly valid point and an
appropriate note on which to end our brief sojourn into Polish-UK
relations.
Question
put and agreed
to.
Clause 103
ordered to stand part of the
Bill.
Clauses
104 to 108 ordered to stand part of the
Bill.
Further
consideration adjourned.—[Mr.
David.]
Adjourned
accordingly at thirteen minutes to One o’clock till this day at
Four
o’clock.
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